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Can You Fight Poverty by Paying Kids to Go to School?

MEMPHIS — On one side of South Lauderdale Ave. sits the Foote Homes, among the last of the old federal housing projects that once proliferated in South Memphis, a low-slung, dun-bricked complex marked by stuffed animal memorials to dead teenagers, a place where two grown women recently pummeled each other silly while neighbors stood by laughing, smartphone cameras rolling for YouTube posterity.

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On the other side of Lauderdale, not 150 feet away, sits the shiny, borderline-surreal Cleaborn Pointe at Heritage Landing, a manicured subdivision of semi-attached townhouses with 10-foot ceilings and white-railed front porches that seem to have been airlifted by aliens from a planet called Suburbia.

But behind those reassuring facades persist many of the same underlying problems found at the housing project across the street: single-mother households, substandard schools, lousy off-the-books jobs, a near-universal dependence on government support. Cleaborn looks a world apart, but in fact many of its residents are drawn from other projects around Memphis that have been demolished over the years under a massive federally subsidized effort to replace the city’s crumbling housing stock that poured as much as a quarter-billion dollars into Memphis over the past decade—without conquering the city’s endemic poverty.

“I had my first baby when I was 14 years old. You know, that’s kind of the whole story right there,” says Tamica Gordon-Cole, 35, sitting in her gleaming new kitchen table at Cleaborn, speaking above the clamor of the small army of kids who live with her in the four-bedroom rental.

About one of every three families in this river city of 655,000, one of the perennially poorest in the country, lives beneath the poverty line, and thousands more teeter just above it. Figuring out how to pull people like Gordon-Cole out of the permanent underclass has been one of the most vexing challenges the country has faced in the past half century, and it remains unfinished despite the billions spent on the effort. Gordon-Cole’s house is located exactly one mile south of the Lorraine Hotel, where Martin Luther King Jr. was assassinated as he embarked on a never-finished Poor People’s Campaign that was supposed to transform the civil rights movement into a quest for economic equality. Forty-six years later, the marchers are gone, the movement is mostly dormant and the national poverty rate is basically the same as it was when King made his final speech here.

But these are different times, and a new kind of anti-poverty push, less a movement than a technocrat’s dream, is quietly being tested here, a modest experiment that could help redefine a static national conversation about how to deal with intractable poverty of the sort that not only has overwhelmed the old projects like Foote Holmes, but also afflicts even the shiny new places like Cleaborn Pointe. Three years ago, Gordon-Cole was one of 600 people (most of them single mothers) selected for the Memphis Family Rewards Program, a widely watched trial that provides cash incentives to poor parents and their high school-age children for completing tasks that seem, at first glance, absurdly second nature for middle-class families. A student who compiles an acceptable school attendance record gets $40 a month, showing up for an annual dental or medical check-up means a $100 check, grades are monetized ($30 for an A, $20 for B, $10 for a C) and taking a college entrance exam like the ACT gets you a $50 check. Parents are also rewarded: Adults get a $150 monthly bonus, up to $1,800 a year, simply for working full-time.

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OPTICS: Walking in Memphis (click to view gallery)

The rewards system, modeled on similar programs in Mexico, Brazil and Indonesia principally aimed at the rural poor, is one of the few genuinely novel anti-poverty experiments to sprout up in the innovation desert that is post-1996 welfare reform in America. Enthusiasm for the programs, known as “conditional cash transfers” (CCTs), remains high internationally, and has been enthusiastically embraced by the Davos set. In a 2009 report, the World Bank hailed the success of CCTs in Mexico as “powerful proof that well-designed public programs can have significant effects on critical social indicators.”

But paying poor people to perform quotidian tasks is a much harder sell in the up-from-the-bootstraps culture of the United States, and the cash transfers have been ridiculed or, at the very least, greeted with skepticism everywhere they’ve been tried in America. Even supporters admit they’re a bit dubious, as when the caseworkers administering the program in Memphis pointedly asked me why they couldn’t get a little extra cash for being responsible grown-ups. “No joke. I could use an extra $150 a month for showing up at work,” one of them told me. “Do you really think our clients are that much worse off than we are?”

Even in liberal New York, billionaire Mayor Michael Bloomberg—a onetime engineering student who tends to view even the most complex social policy problems as design challenges—was forced to pay millions of dollars of his own money to fund an experiment in cash transfers in 2007 because he knew the city council would balk at using tax dollars. In Memphis, Mayor A.C. Wharton, a Bloomberg ally, has engaged in what amounts to a four-year running battle with his city council to pony up relatively modest sums (less than $1 million a year) to offset the roughly $6 million being invested by Bloomberg’s philanthropy and federal grants.

On the left, a stuffed animal memorial commemorates dead teenagers outside a home on South Lauderdale Ave. in Foote Homes. On the right, on the other side of the same street, the sun sets on the manicured lawns of Cleaborn Pointe in Heritage Landing in Memphis, Tennessee. | Mark Peterson/Redux

It’s not yet clear how effective the Memphis program and its sister project in the South Bronx will prove, but proponents say that, barring a massive new federal jobs program for the poor modeled on the New Deal, it’s such smaller, targeted efforts that offer the best hope for those most in need of a push from poverty to the middle class, even if the political optics of paying a kid to get a C are awful.

“It’s really the boldest alternative out there, especially at a moment when there isn’t a taste for transferring more money to poor people,” says James Riccio, who is in charge of assessing the Memphis and New York rewards program for the Manhattan-based social policy research group MDRC.

WATCH: Why Memphis is Going Back to School to Fight Poverty

“Why should you pay people to do something that is decent and right?” asks Mayor Wharton, a former public defender who says he is willing to try “anything, anything at all” to reduce poverty in a city that struggles even to fund its bus lines, an economic necessity for hundreds of thousands of people too poor to drive to work. “My somewhat rural response is that in the South, we pay rich farmers to do nothing—we pay you not to farm your land to keep your prices up,” he adds. “That’s a part of the American fabric. It’s accepted fact in the most conservative quarters that it’s OK to pay somebody to sit on their porch and sip mint juleps and get a government check. It ought to be OK to reward some poor person for actually doing something.”